NOTES ON WATER PRICING DATA

Many factors in water charging practices change rapidly over time, e.g. prices charged, recovery rates and price structures. The data presented in Table A1.1 reflect the information provided by the cited source but there is no certainty that the information is still current.

Where the source has provided price information in a local currency this is expressed in Table A1.1 in US dollars using an average exchange rate for the year the source was published or the year cited in the text.

General trends: Because of the factors noted above, it may be misleading to apply too rigorous an analysis to the figures and other information presented in Table 1. Nonetheless, the following general observations can be made.

Country/region

There can be important differences in water charges within a single country. Such differences may reflect different objectives, different water sources, different degrees of water scarcity and irrigation schemes with different technologies, farm types or socioeconomic objectives. Therefore, it is often not possible to make a simple statement describing irrigation water charging at a national level.

Charging basis

Many different formulations for charging are reported. These include:

• irrigated area: may vary with crop or season;

• water volume delivered: constant rate per cubic metre, and rising block tariff;

• two-part tariffs: fixed per area + volume.

Price per 1 000 m³

The range in volumetric price is very great. Very high prices are reported for the following countries:

Leaving these few very high prices aside, there is still no neat and narrow band in which volumetric prices fall. Canada and Romania report prices below US$1/1 000 m³ but this represents the lowest extreme. A price of about US$20/1 000 m³ is probably indicative of the “average”volumetric price charged for irrigation water.

Price per hectare

Where irrigated area is used as the charging basis, there is again a very great range in the prices reported. Here comparisons are more difficult as it is not always clear in the literature whether the figures quoted are seasonal or annual. The highest prices are reported for:

US$40-50/ha/year is closer to an “average” price in more developed countries but in India many states charge no more that US$10/ha/year, and Mohtadullah (1997) says that the Revenue Department in Pakistan receives approximately US$0.33/year.

Collection efficiency

Many sources give no information on this aspect of water charging. Where information is provided, it again indicates huge variation both within and between countries. Thus, on the surface irrigation schemes of Bangladesh, collection rates are no more than 10 percent of the billed revenue, but on deep tubewells there is “almost full collection of revenues due”. Of the countries where information on collection efficiency is reported, Mexico achieves the highest level with a national figure of 92 percent reported by Svendsen et al. (1997).

Proportion of costs recovered

There is more information available on this than on collection efficiency. The wealthier member countries of the OECD stand out as the few entries in Table 1 where there is reported to be full recovery of annual O&M costs and some recovery of capital costs. These include Japan, France, Australia, Spain and the Netherlands. However, in the overwhelming number of cases, water charging does not cover annual O&M costs.

TABLE A1.1

Water pricing for irrigation - data from the literature

Notes:

1. Irrigation water prices are expected to rise further to ensure the financial viability of irrigation water suppliers.

2. IAs are public NGOs with full legal authority, including the power to tax.

3. Cost of delivery.

4. Since 1992, real changes have risen by 11 percent.

5. Estimated that charges would have to increase by 80 percent to cover all costs.

6. Exchange rates in 1998, US$ = 47.05 Bangladeshi Taka.

7. As of 1997-98, water rates were charged in only 6 of the 15 schemes (GK, Chandpur, Karnaphuli, Manu River, DND and Buri Teesta), although proposals exist to extend the system by another 6 and raise existing rates substantially.

8. Boro is the main irrigated crop under normal crop sharing conditions.

9. This value appears high - in 2002, farmers were paying TK 1250 per acre (+ fuel costs at approximately US$7 per acre) (J. Skutsch, personal communication, 2002). This equates to approximately US$8 per ha (+ US$3 per ha fuel costs) (based on exchange rates for Jan.-April 2002, US$ = 59.48 Bangladeshi Taka).

10. In 1999, US$ = 49.19 Bangladeshi Taka.

11. As part of this arrangement, BMDA pays up to one-third of the DTW repairs and maintenance, up to an annual limit of one-third of the rental amount.

12. The current water charging system for public irrigation projects is inconsistent. Tariffs are allocated to the sponsoring agency and distributed to the irrigation districts.

13. K1 reflects capital costs and is paid per ha; K2 is designed to cover O&M costs - and is estimated as a function of the volume of water used and is paid per 1 000 m³.

14. Does not include annual tax for irrigation and drainage (collection of irrigation and drainage taxes reportedly suspended since 1999).

15. Exchange rate in 2001 (no year specified), US$ = 1.12 Euros.

16. Income of ISC changes from year to year owing to changing demands for irrigation water.

17. Less than 10 m³/day inside “proper land” (landowners) is free of charge (for groundwater and surface water). For individual farms with 0.2 ha arable area outside the “proper land”, free (surface water) is allowed for irrigation up to 3 000 m³/ha/month. All other users have to pay a fee for water abstraction by surface water or groundwater by January 2001.

18. By January 2001, the water abstraction fee should be US$0.46/1 000 m³ for surface water and US$2.3/1 000 m³ for groundwater (Bardarska and Hadjieva, 2000).

19. Based on 1996-98 exchange rate, US$ = 0.85 Euros.

20. No subsidy for private sector, state subsidies for Irrigation Systems Company.

21. Difference in price/costs covered by subsidies and other activities of the Regional Irrigation Systems.

22. According to OECD (1999), this is the most representative figure.

23. Districts have gained almost complete control over management.

24. Of the five districts, only RUT established an equipment replacement fund. No district has set up a capital replacement fund for basic infrastructure.

25. In view of the poor condition of the agriculture sector, the low percent of irrigated land and the very low collection efficiency in the past, the State Water Directorate decided not to levy water user fees on irrigation water (Ostojic and Lukšic, 2001).

26. In 1999, irrigation water use decreased to one-third of the 1998 amount; but climate (high precipitation) was more responsible than a price increase.

27. In 2000, US$ = 1.09 Euros.

28. Capital costs.

29. Prices of a sample of suppliers under supervision of an Eastern Hungarian River Basin Authority were obtained - prices as such are not available in any public material. Agricultural water prices are unregulated; it is a free price system. Control over prices is exerted via a process of tender (if supply is put to tender). There is no official requirement to collect price data and any information collected is confidential.

30. In 1999, US$ = 237.4 Hungarian Forint.

31. Most states impose other levies on canal water in addition to water charges (cited in Saleth, 1997).

32. In 1989-1990, US$ = Rs16.65 (Saleth, 1997).

33. In West Bengal, water rates vary only by season and in Kerala, rates are based only on irrigated area. In all other states, the area-based water rates are highly differentiated, not only by crop and season but also by category of project, irrigation type (flow or lift), category of user (private parties, cooperatives, government lift schemes) and other factors (cited in Saleth, 1997).

34. Israel is now working on recommendations whereby water charges vary according to water quality (depending on salt content). Also being discussed is pricing “reclaimed” wastewater and pricing to reflect the quantity and quality of water in aquifers, as well as the location of an aquifer (Yaron, 1997).

35. Farmers using more water than the quota provides pay much more for the excess (Yaron, 1997).

36. According to OECD (1999), this is the most representative figure.

37. In 1999, US$ = 0.71 Jordanian Dinar.

38. The Jordan Valley Authority have stopped their programme of repairing water meters.

39. Water prices would have to be tripled to achieve full cost recovery (cited in Huppert and Urban, 1999).

40. In 1997, US$ = 75 Tenge.

41. This is the water charge set for agricultural users by the Govt. Resolution of Aug. 1997. In addition to the water charge, farmers also pay a service charge for the release and delivery of irrigation water by local water management authorities - US$6.67-66.67 per 1 000 m³.

42. Where users pay a flat rate for water per season per hectare - in some cases, users are allowed to irrigate prior to payment, or they pay part of fee with an agreement to pay the rest of the fee after the end of the season.

43. Idea of charging the districts on a volumetric basis seems logical, but it assumes that the districts will always have water.

44. his was possible because modules could often provide more irrigation sessions over and above the amount upon which the planned collection target was based.

45. US$4 per 1 000 m³ for consumption between 15 000 and 20 000m³/ha; US$10.7 per 1 000 m³ between 20 000 and 25 000m³/ha; US$21.8 per 1 000 m³ between 25 000 and 30 000m³/ha, and US$32.7 above 30 000m³/ha.

46. Irrigation companies do not receive subsidies from the government and must collect sufficient revenues from users to at least cover operating costs.

47. Derived from a value of PPP US$425 in text, using PPP exchange rate for Jan.-June 1995, 1FCFA = 0.68 US cents, 1FCFA = 0.01French francs, and US$ = 5.04 French francs for same period.

48. Government aim - cooperatives should be responsible for O&M costs, part of initial capital cost, some of costs of government’s supervisory agency and savings towards repair and renewal.

49. Revenue per hectare - includes water rates, drainage and miscellaneous receipts.

50. In 1991, US$ = 144.58 Portuguese Escudo.

51. Historically, in Portugal prices of irrigation water have been set to provide subsidies for the cultivation of particular crops or to support agricultural prices.

52. Introduced in 1991, water charges in Romania are imposed on direct consumption or use, as well as on discharges according to their quantity and quality. Crops may be grown in cases where their value is less than the real cost of water used to irrigate them. Economic difficulties have decreased farm prices and consequently the demand for irrigation water (which has also benefited from the absence of recent droughts).

53. In 2000, US$ = 1.09 Euros.

54. Costs of electricity for pumping from high-pressure pumping stations to hydrants or rice fields and the costs of maintenance and repairs under land reclamation arrangements will be taken over by the newly established Irrigation Water Users Associations, and will be supported by the state for five years after their formation.

55. In 1999, US$ = 15383.69 Romanian Leu.

56. In 1997, US$ = 7187.75 Romanian Leu.

57. In 1999, US$ = 0.94 Euros.

58. The higher charges are paid by associations obtaining water from groundwater sources that need pumping or from major water transfers. Observations show that farmers in some associations pay nothing. Others may pay US$500/1 000 m³ in times of drought or for occasional or emergency water.

59. In 1995-96, the government founded the Irrigation Water Corporation and reduced subsidies significantly.

60. In 1995-96, US$ = LS 900 (Adam, 1997).

61. Other crops are sorghum, groundnuts, wheat and sunflowers.

62. Using exchange rate in 1995, US$ = SL 45.5 (cited in Waughray and Rodríguez, 1998).

63. Financial costs of extracting groundwater from a shallow and deep well, respectively. Farmers also recycle domestic wastewater through simple splash irrigation techniques.

64. In May 1996, US$ = Tsh606 (Mujwahuzi, 1997).

65. The Commissariats Regionaux de Développement Agricole use three types of water charges: a lump sum per hectare where metering is not available, a per-cubic-metre tariff for perimétres publiques irriguées with meters, and a two-part tariff with a fixed per-hectare component and a volumetric component.

66. Price in water markets.

67. Implied price of water from the Tokwe-Mukorsi Dam that producers will face.

68. A conventional rural water supply project in Zimbabwe estimated recurrent O&M costs to donor agency to be US$90 per water point per year.

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A full description of the cases studies is included in Cornish & Perry (2003).

Table A2.1 summarizes the analysis of the six case studies. The left-hand side of the table considers cost recovery and the 'means' that contribute to it, i.e. whether the level of charge and the level of fee collection are sufficient to achieve the specified degree of cost recovery. The right-hand side of the table reviews whether demand management is also being pursued through volumetric pricing or the use of water allocation or rationing. This second approach is a non-monetary instrument that avoids some of the implementation problems associated with demand management through price. The table summarizes whether selected preconditions, specific to that tool and objective, are in place in the country concerned. The table does not consider more general preconditions, such as the need for political will, the development of enforcement mechanisms or the allocation of sufficient resources, which are required for any water charging mechanism to succeed.

The following example shows how to interpret Table A2.1. In Haryana, it is government policy to recover O&M costs. This aim is achieved, but capital costs are not recovered. The level of current irrigation charges is adequate to meet the objective, and the collection of charges is satisfactory. Volumetric pricing is not practised; the infrastructure does not allow volumetric supply to individuals. Current water charges (if converted to a volumetric equivalent) would have minimal effect on demand. A formal system of water allocation is established, based on proportional distribution.

TABLE A2.1

Case study summary

Notes:

Y means:

· an objective is currently part of policy/achieved;

· a means is currently effective;

· a tool is currently used;

· a precondition is met (should the tool be applied).

1. Haryana achieves full recovery of O&M costs by allocating costs differentially among users (so that industrial users, for example, pay much higher charges per unit of water delivered than agricultural users). Such an approach depends upon an agency having a variety of non-agricultural customers.

2. The irrigation service in Haryana is achieved through fixed, proportional distribution of available water among farmer groups, with individuals entitled to a specified period of time each week. The water right is for a fixed proportion of the volume available and measurement is of the duration of delivery rather than of volume. Area and crop successfully irrigated are taken as proxy indicators of service, and are the basis for billing.

3. Electricity charges to agriculture in Gujarat (and India generally) are based on a flat charge per month based on motor capacity, which results in substantial subsidy. This charge is fully paid by the farmers.

4. The farmers base their payments to the group on the electricity meter reading, which is a close proxy for water delivered. (Thus, the state charges a flat rate for electricity, but the farmers in the group charge “volumetrically”).

5. If electricity prices were set at levels required for financial sustainability of the power companies, irrigation of fodder crops (the highest value crop) would be unprofitable at present water table depths.

6. Under the Indian Constitution, land owners own the water resources beneath their land - so that control of overdraft is not generally possible.

7. Former Yugoslav Republic of Macedonia aims for full cost recovery (O&M plus capital, including past debts of irrigation projects). The projected budget for Tikvesko Pole Kavardaci Water Management Organization (WMO) sets out a total income in excess of the O&M component of total costs. However, actual income is well below this, as fee collection rates are very low.

8. The decline in irrigated area in Former Yugoslav Republic of Macedonia means that the water available currently exceeds demand.

9. Moroccan policy is to recover all O&M costs plus a proportion (40 percent) of index-linked capital charges.

10. The authorities use a combination of volumetric charges (to discourage waste and encourage productive use) and fixed allocations to ensure that surface water use matches the available supply.

11. Current charges cover O&M costs, but do not fully fulfil the aim of recovering a significant capital element. The Haouz scheme does not levy fees on farmers in “traditional” irrigated areas and so has a budget shortfall.

12. Farmers are advised at the beginning of the season how much water is available per hectare. Deliveries are rationed to that level, and charges are based on quantity delivered. The farmer can take either the full volumetric quota, or a lesser amount.

13. Indications are that the current, very high, charges for water (and the shortage of canal water) are impelling farmers to use groundwater. Aquifers are already substantially overdrafted, focus is needed on establishing groundwater rights. The result of high pricing is to cause farmers to change their source of water, though probably not their overall consumption.